Who Pays? More on the Impact of Raising the Medicare Eligibility Age

In a post last week, I wrote about the Congressional Budget Office’s new projection that raising the age of eligibility for Medicare from 65 to 67 could save the federal government $113 billion over the next decade. But I missed a big part of the story: that this savings might be far outweighed by increased costs to senior citizens, employers, and state governments.

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Families Spend 17% Of Their Income On Healthcare-Related Costs

One of our biggest long-term economic challenges is the exploding cost of healthcare. From 1999 to 2009, per capita healthcare spending grew at two and a half times the rate of inflation. Healthcare spending now constitutes 17.6% of our GDP, compared to 13.8% in 1999, and is expected to account for half of GDP by 2082 if current trends continue.

A new study from RAND quantifies how these rapid increases in healthcare costs affect a typical family. Continue reading

Would A Soda Tax Make Us Healthier?

Image Source: Flickr user poolie under a CC license.

Food columnist Mark Bittman had a big, graphics-filled article in this weekend’s NY Times arguing that taxing soda can prevent obesity. He claims that a 20% increase in the price of sugary drinks (soda, fruit drinks, sports drinks) would reduce consumption by 20% and prevent 1.5 million people from becoming obese in the next decade. Money raised through the tax could be used to subsidize the price of healthy food, making it cheaper, and support programs that promote good eating and exercise.

One problem with his argument? When a product becomes more expensive, most people don’t just eliminate it completely from their lives; instead, they substitute something similar but less costly. In other words, if sugary drinks are taxed, consumers aren’t just going to give them up and walk around chugging water all day. Most likely, they will switch to diet drinks (the taxes proposed by Bittman and others apply only to sugary, caloric drinks).

But if we can encourage people to switch from high-calorie to diet drinks that’s a good thing, right? Unfortunately, no. Recent studies have shown that diet soda is linked to obesity and associated health problems like diabetes and high blood pressure. It’s not yet clear whether diet soda itself causes weight gain or whether consuming diet soda is just a sign of an overall poor diet. Either way, taxes that incentivize people to switch from sugary drinks to diet ones, without changing the rest of their diet, won’t do much to curb obesity. Furthermore, research on a proposed soda tax in Illinois showed that many obese people have already substituted diet drinks for sugary ones, so a soda tax wouldn’t affect them much.

I think Bittman has the right idea: we should consider more carefully how prices, availability, and other incentives shape the way people eat, and what role government does or can play in structuring these incentives. Taxing soda might not be a bad step, but I don’t think it will be the cure-all Bittman suggests.

On the upside, the article was accompanied by a cool-looking interactive timeline that shows landmarks in the development of our current high-fat, high-sugar, highly-processed American diet.

Bad Food? Tax It, and Subsidize Vegetables
The New York Times // Mark Bittman // July 23, 2011

New RAND Study Shows Proper Mental Healthcare For Veterans Pays for Itself

President Obama’s new policy to send formal condolence letters to the families of active duty soldiers who commit suicide has brought increased attention to the serious mental health challenges our troops face during their service and after they return home. Military suicide rates have reached record highs, nearly doubling in the past decade, and suicide now rivals the battlefield in the number of deaths it causes.

Of the 2.25 million American soldiers who served in Iraq and Afghanistan in the past decade, an estimated 20% report symptoms of PTSD or major depression. Unfortunately, only half of these individuals seek treatment each year and less than a third of those who do receive high-quality care that follows proven therapeutic models (known as EBT or “evidence-based treatment”).

The moral obligation to provide our soldiers and veterans with proper mental healthcare is strong enough for most citizens to insist it be a high priority, regardless of cost. A new RAND study shows that proper treatment also saves money by reducing the social costs of PTSD and depression among veterans. Though providing EBT to all soldiers who need it is more costly than the alternatives – less expensive, less effective treatment or none at all – in the end it more than pays for itself by increasing veterans’ productivity and ability to support themselves; reducing costs related to suicide; and diverting money wasted on ineffective treatment.

While military leaders have made increasing efforts to prevent suicide, much remains to be done. Providing proper mental healthcare for our troops is one of those rare issues where there is not only widespread agreement about what we should do, but the right choice is also the cost-effective one.

Invisible Wounds, Visible Savings? Using Microsimulation to Estimate the Costs and Savings Associated with Providing Evidence-Based Treatment for PTSD and Depression to Veterans of Operation Enduring Freedom and Operation Iraqi Freedom
Psychological Trauma: Theory, Research, Practice, and Policy
// Beau Kilmer, Christine Eibner, Jeanne S. Ringel, Rosalie Liccardo Pacula // RAND // June 2011
(A brief summary of the study is available here.)